Buyers Acting Quickly When They Find Value

Perceptions are a very powerful thing. In good times, perceptions run to the extreme on the high side, and in more challenging times they run to the low side.

Among the current perceptions about the housing market is the idea that “everything” is selling slowly and well below asking price. A few years back, we had an equally strong perception that “everything” was selling lightning fast, and well above asking price.

As in all things, the reality is different than the perception. Three important measurements of market success expose the misperceptions that have abounded. The average days on market, the number of homes sold, and the sale to list price ratio, all reveal the truth in the marketplace.

In sum, the truth is that houses must be well-priced to sell in any market and there are buyers in any market as long as price matches the existing supply and demand picture.

A great example is found at the peak of our unprecedented seller’s market, in late summer of 2006. We commonly hear that “everything” sold in just a couple of days and for well above asking price. The reality is not so.

In August/September of 2006, well-priced homes were in fact selling quickly, averaging just 45 days on market. That is fast compared to 90 day averages seen in a balanced market, but still far longer than just a few days on market.

Also, not all homes were “well-priced”. We define well-priced as those homes that did not require a price reduction before selling. Only 59% of homes at the time were well priced. The other 41% that required price reductions sold at just 93.9% of asking price and sat on the market an average of 102 days.


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So even in the midst of a market that was hyperactively escalating, it was still possible to over-price a home. Buyers ignored 4 out of 10 homes until those sellers brought prices down.

Equally telling is the fact that well-priced homes still averaged just 99.2% of asking price. That is close to full price, but it certainly does not support the idea that every home was “bid-up.” To be sure, many homes were, but most were limited to homes that were listed just below market value. Buyers themselves then exposed the true value by bidding the home price up.

In today’s market, perceptions are equally misaligned with the market’s actual performance.

The most common perception is that homes are taking a very long time to sell. In fact, well-priced homes today (based on May 2009 sales) are selling in an average of just 24 days – three weeks faster than the peak of our hot seller’s market.

On the opposite end of the spectrum, homes that required at least one price reduction before selling sat on the market for an average of 189 days, and required an average price reduction of 18.4% before selling.

The biggest reason that our market is moving faster for well-priced homes has to do with a couple of general market conditions. The first is that interest rates are very low and buyers want to act while they are down. Secondly, the $8,000 first-time homebuyer tax credit, which expires later this year, is propelling those buyers more than ever. Buyers know these are fleeting conditions, so they are acting now.

However, the growing disparity in days on market between well-priced homes and those that require at least one price reduction tells us that buyers are being ever more critical about the market. They are ignoring those homes that do not present value, but they are jumping quickly on those that do. And as we saw during the peak, these well-priced homes are selling at close to full asking price - 97.7%.


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Statistics compiled by Coldwell Banker Evergreen Olympic Realty, Inc. from the NWMLS database. Statistics not compiled or published by NWMLS.

Downtown Olympia Housing News

Last night’s decision by the Port of Olympia sets in motion one of the most important opportunities our community has for realizing the goal of more market rate housing in downtown Olympia.

The Port selected Tarragon as the developer for the land surrounding the new Hands On Children’s Museum on East Bay. The vision is to create an area of mixed uses, including office, retail, a hotel and conference center, and residential space. The residential component will help start the city on a path toward meeting its goal of 2,500 units of market rate housing in downtown. Establishing a greater diversity of housing in downtown will help our community in so many ways.

Concentrating more of our growth in downtown will reduce sprawl that occurs even with the Growth Management Act restrictions that exist. Over the next 20 years our population is expected to grow by 128,000 residents. We must get serious about creating greater densities in the urban core if we are to find places for people to live and maintain some of our rural communities.

Another benefit is job retention and creation. A healthy downtown will support existing business, and attract new businesses and tourism, which has the effect of importing dollars to support jobs. Most downtown business owners know that increasing housing and adding a conference center are both vital components to creating a financially sustainable downtown core.

Finally, creating greater densities adds to the diversity of our core, which in turn enriches our community. An excerpt from the book Rebuilt Green¸ the story of the Ecotrust’s efforts in building its headquarters in the Pearl District in Portland, Oregon, captures this sentiment perfectly.

In the preface to the book, the head of Ecotrust, Spencer Beebe, recounts words from one of his board members, Jane Jacobs. She states that “Good things come from evolution, not revolution; from building up new things, not tearing old things down.” Spencer continues that Jane reminded him that “civilizations need farms, forests, and rivers to support dense populations in the cities, and that cities repay the favor by getting lots of heads together to innovate and invent. Whether one’s concern is natural ecosystems or economic systems, density propels evolution.”

With great leadership, our community is on the verge of propelling itself to new heights. Every urban renewal project that occurs around the world starts with a catalyst. Several current projects, LOTT Administration, a public plaza, and the Hands On Children’s Museum, underway at East Bay are the best catalyst for city wide renewal that this community has ever seen. We must make the absolute best of this opportunity.


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LOTT is already underway with its new administrative and educational center downtown. Construction will be complete next year on this new world-class interpretive center that will showcase reclaimed water. This new facility also will house a state of the art cogeneration plant, turning methane gas into power. When complete the new LOTT facility will be a beacon of environmental stewardship and a draw for business and tourism.

LOTT’s neighbor to the east will be the new Hands On Children’s Museum, which does so much to help children and families in our community. Other cities that have achieved successful urban renewal projects did so by locating children’s museums in their downtowns. The new 25,000 square foot facility is the anchor of the East Bay renewal. It will be a draw from more than a quarter of a million visitors to downtown each year.

Along with these two great projects, an outdoor one-acre public plaza will be constructed. This space will give the community another great gathering space on a beautiful peace of property.

The selection of a developer for the remaining property on East Bay is just the first of many steps in the renewal project. The process of filling out the vision for the area starts today. Take the time to get involved and voice your opinion about this vital area.

Acknowledging a Community Leader

After 27 years of service to the Providence System of Hospitals, Scott Bond retires today as CEO of Providence SW Washington.

Under Scott's leadership, Providence has continued to grow in service to our community. St. Peter Hospital has received numerous awards and recognition for its outstanding work. The hospital ranks in the top four in the state in charity care, and has a collection of some of the best medical doctors, nurses, and staff in the nation. A community our size is fortunate to have a care facility that offers so much.

As real estate professionals, we know that quality of life is one of the biggest drivers of the value of real estate in any area. The presence of Providence in our community adds tremendously to not just the health of our community but to the vitality of the entire region.

So we take a moment to acknowledge Scott and thank him for his service.

Housing Sales and Mortgage Interest Rates

After three weeks of increases, mortgage interest rates took a dip this past week. Freddie Mac reports that 30 year, fixed-rate mortgages averaged 5.38%, during the week of June 18th. This is down from 5.59% the week prior.

The current rates are much lower than at this point last year when they reached 6.32%. And while the rates are higher than the low point seen in April, housing sales continue to climb. The return of home prices to sustainable levels has defused the up-tick in interest rates.

Perhaps the best example of the interplay between home prices and mortgage rates is the failure rate of mortgage loan modifications. Over the past 18 months, many loan providers have reworked borrowers adjustable rate mortgages to bring interest rates down to better levels.

Despite the significant decreases in interest rates through the modification process, a huge percentage of these borrowers still end up in default. See our blog posting on 12/23/2008. The reason is that the mortgage is still tied to a home price that was simply too high to sustain. This means that price becomes the most important factor to buyers.

Interest rates will rise and fall. Rates are not in the control of the buyer or seller. Setting price to match the market forces, however, is. Many factors influence a homes market value, including location, condition, economic landscape, supply of homes, and mortgage rates. As interest rates rise, fewer buyers will qualify for mortgages, which means that sellers will adjust price to match that lower level of demand.

In the end, if mortgages are based on a sustainable purchase prices buyers will be able to afford the home purchase regardless of the mortgage rates prevailing at the time. In our local market, the prices on many homes continue to provide that opportunity to home buyers and sellers.

Olympia Ranks as in Top 10 places to Live in the U.S.

South Sound locals have long known about the quality of living in our neck of the woods. Thanks to Kiplinger Personal Finance Magazine the world now knows too.

In its annual ranking of the nation's Best Cities, published in the July 2009 issue of the magazine, Olympia came in as the 6th best place to live, work and play. The report, which labels Olympia as the "Northwest Jewel", highlights the city's cultural attractions, work force and jobs, and educational opportunities.

Come join the celebration of this recognition at 11:00 a.m. on Friday June 12th at Olympia's Farmers Market.

To view the video report on Kiplinger.com visit:
http://www.kiplinger.com/video/index.html?bcpid=572031303&bclid=1571610693&bctid=23940572001&kipad_id=47

To read the printed report visit:
http://www.kiplinger.com/magazine/archives/2009/07/2009-best-city-olympia.html

Positive News in the Housing Market

The housing market stats for May 2009 released today by the Northwest Multiple Listing Service (NWMLS) reveal some positive trends. Chief among those are an escalating number of sales and price stabilization in many of the 19 counties covered by the NWMLS.

Across the NWMLS Pending sales in May were up 17.7% from May 2008. While overall median prices are down 10% from year ago numbers, eight of 19 counties show price gains since January (Thurston County is one of those counties).

Most of the gains in sales are being seen in the markets closest to Seattle. King County pending sales are up 27% from a year ago. Thurston County pending sales jumped nicely as well, with a 17.5% increase.



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The reason for the big difference between King and Thurston counties is price. King County's average sales price is down 16% from last year compared to a 10% reduction in Thurston County since May 2008. (It is also important to remember that King County's prices escalated at a much steeper rate than did Thurston County's during the run-up. This means that King County required a steeper correction to get back to sustainable prices.)

Those bigger price reductions in King County are bringing buyers back to its market at a faster pace. And while Thurston County's sales gains have been solid, our areas market average price will continue to see pressure as supply still outweighs demand.

While media attention tends to focus on market-wide numbers, like average and median prices, each individual house is unique in appeal and pricing. One house may be priced at market value while another is priced above it. Therefore, it is important for buyers to evaluate each house individually and not let overall market trends make the call.

If someone were to stay out of this market waiting for the market average price to bottom, that person may miss out on the perfect home that has already hit its bottom. We see examples of that everyday.

For more on this topic see our blog posting on 5/18/2009 entitled Well-Priced Homes Still Selling Quickly.

Statistics compiled by Coldwell Banker Evergreen Olympic Realty, Inc. from the NWMLS database. Statistics not compiled or published by NWMLS.

Tax Credit Helping Thousands of Buyers

Early results show that the first-time homebuyer tax credit is helping hundreds of thousands of homebuyers. The following report from Real Trends demonstrates this fact.

According to very preliminary figures from the IRS, some 567,685 taxpayers claimed more than $3.9 billion worth of first-time homebuyer credits on their 2008 tax returns, according to Steve Cook of realestateeconomywatch.com. Even though 38,158 may be disqualified because the IRS has found they had ownership in a personal residence within the past three years, the total will certainly exceed the $4.6 billion estimated by Congress last year. The preliminary figures were from returns received by March 6-five weeks before 2008 returns were due. These preliminary returns means the credit helped to make possible at least ten percent of the roughly 5 million new and existing home sales last year. No doubt it was a deal maker in many of those transactions. Source: Steve Cook, Real Estate Economy Watch

Locally, we are also seeing buyers take advantage of the credit. And this year Congress expanded the credit to $8,000 and eliminated the pay-back requirement. This means that even more people will take advantage of the program in 2009.

Remember that the credit exists only on purchases through November 30, 2009. Considering that it is likely that more money will be spent than Congress allocated, it is not a guarantee that the program will be extended. It is, however, having a positive influence on entry-level price segments, which is where every housing recovery begins. If the current housing trends continue, the tax credit will turn out to be money well spent.